Blame Ottawa for high retail prices in Canada: Retail Council

OTTAWA — The federal government should take a chunk of the blame for the stubbornly high cost of consumer goods in Canada when compared with prices south of the border, the retail sector said Tuesday.

Testifying at special Senate hearings probing the reasons for price discrepancies between Canada and the United States given the value of the Canadian dollar, the Retail Council of Canada (RCC) said retailers are being unfairly tarnished as the culprit.

In addition to “outdated” import duties on finished goods and a lack of harmonization of different standards and requirements, council president Diane Brisebois flagged Ottawa’s system of supply management affecting dairy and poultry prices as three of the “largest contributing” factors.

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“We understand that this is a sensitive issue, but if this committee is really going to look at factors that contribute to the differences in pricing between Canada and the U.S., it would be remiss in not addressing supply management in some way,” Ms. Brisebois told members of the Senate finance committee.

‘Suppliers of products . . . will charge Canadian retailers up to 50% more to buy those products than they charge retailers in the United States’

Vendor pricing in Canada is the fourth “significant” area of concern for the council, she testified.

But it would be wrong to assume that large, multinational retailers “should be able to negotiate one price from suppliers for the products they sell in North America,” Ms. Brisebois said, pointing out the majority of products that retailers buy are sourced in Canada.

“The reality is that suppliers of products — those where you would tend to see the greatest difference in pricing — will charge Canadian retailers up to 50% more to buy those products than they charge retailers in the United States.”

That means retailers are often “at the mercy of the multinational vendor Canadian price list,” said Ms. Brisebois.

The reasons cited by suppliers for the higher prices include: it’s what the market can bear; it’s a smaller country, so it’s more expensive to do business; and higher prices are necessary to compensate our Canadian distributors and wholesalers, she added.

In its accompanying written submission, the retail council emphasized the operating profit margins in the retail sector are around 3.4% (comparable to the profit margins in the U.S.) and said Ottawa shouldn’t allow the impression to fester that retailers are gouging their consumers.

“While RCC acknowledges that the federal government does not, and should not, have a role to play in dictating how businesses negotiate contractual agreements between each other, the government does have a role to play in ensuring that they do not perpetuate the ongoing misinformation to the Canadian public regarding the reasons for price differences in Canada versus the United States,” the submission states.

“Suggesting that Canadian retailers are to blame for the difference is not only misleading and misinformed, it only acts to undermine the critically important relationship between Canadian retailers and their customers.”

The testimony of the retail council followed an earlier appearance of consumer groups, which blamed the price discrepancy in consumer goods in Canada and the U.S. to high levels of concentration and anti-competitive practices in Canada’s retail sector.

The Senate hearings kicked off last fall when Finance Minister Jim Flaherty asked the committee to look at why the price gap across the Canada-U.S. border persists, even though the Canadian dollar remains at or near par with the U.S. dollar.

Mr. Flaherty opened the debate by saying reducing import tariffs could be one way to respond to the “irritating” price gap.

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